Business

Tencent sells $3 billion of Sea shares, causing the stock to drop sharply

Shares of Sea fell more than 11% on Tuesday after Chinese internet conglomerate Tencent said it would sell more than $3 billion of its shares in the New York-listed Singapore e-commerce and gaming group.

China’s most valuable publicly listed technology company said that once the transaction is complete, its equity interest in Sea will drop from 21.3% to 18.7%. SeaNasdaq-listed shares closed down 11.41% at $197.84 on Tuesday.

Tencent’s announcement comes less than a month after the company sold off its stake in JD.com, a Chinese e-commerce business.

The group said it will retain “a substantial majority” of its equity in Sea “for the long term” and will not sell any more shares for the next six months. It did not give a reason for the sale but said the proceeds would “fund other investments and social initiatives”.

Last month Tencent said it would distribute $16 billion in stock in JD.com to shareholders, cutting its stake from about 17% to 2.3%.

A person close to Tencent said at the time of divestment that regulators had not asked the company to sell off its investments, which are collectively worth about $259 billion according to analysts at Bernstein, but Tencent has want to show it’s not “empire building”.

Tencent doesn’t want “to be seen as having a permanent impact on a huge segment of the economy,” the person added.

In addition to selling off its stake in Sea, Tencent also said it would convert Class B shares, which currently have three votes each, into Class A shares at the Singapore company’s annual meeting in February. After the conversion, Forrest Li, the chief executive officer of Sea, will hold all Class B shares, and Tencent’s voting rights in the company will drop to less than 10%.

Tencent has been a major investor in Chinese tech companies, but over the past year it has also Rapid expansion its investments abroad.

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